Financial technology, or FinTech as it is informally called, has altered how both people and businesses use financial services and products in a decentralized fashion, hence boosting access to financial services that were previously available and accessible. It entails using software, mobile apps, and other specialized technology to improve and enhance financial activities.
Businesses are increasingly relying on FinTech services in recent years because they can improve financial efficiency, reduce costs, increase access to capital, provide effective and efficient payment processing, generate data-driven insights, and provide flexibility and accessibility both domestically and globally.
Different Areas Businesses Can Leverage FinTech Services or Solutions
Businesses can make use of FinTech services in these three most important aspects.
- Payment: Over time, the financial sector has evolved from traditional payment techniques to more modern methods. Digital payment solutions and gateways, mobile wallets, blockchain and cryptocurrencies are among them. Businesses can use these to pay financial commitments such as inventories, account receivables and payables, prepayments, salaries, and a variety of others in a seamless and efficient manner. Furthermore, using these payment options ensures that payments may be made or received at any time of day and from anywhere in the world, which reduces the financial constraints that most traditional methods encounter. Examples of Payments tools are Aster, PayPal, Flutterwave, Remita, Venmo, Cash App.
- Lending: Businesses seeking debt finance can also use peer-to-peer (P2P) lending platforms, online market lenders, and non-traditional methods of assessing risk in terms of credit ratings. This lowers bureaucracy and the bottlenecks that are frequent in the delivery of traditional financial services. Examples are platforms such as SoFi, Kabbage, VantageScore and a host of others.
- Accounting: Accounting for a company’s financials is critical, and FinTech software and applications can help with efficient, accessible, and dynamic recording, tracking, and retrieval of accounting files and records. Cloud-based accounting software and expense management tools are deemed appropriate for business accounting tasks in this regard. Some of these software and tools include Aster, QuickBooks, Xero, Expensify.
Emerging Financial Technology Trends
Financial technology is always changing and expanding, necessitating the need for businesses to keep up to stay on the forefront of financial innovation. Given this, firms should keep an eye on the following areas.
- AI and Machine Learning: Artificial intelligence (AI) and Machine Learning are currently having a significant impact on data analysis and, as a result, are useful in giving valuable insights to businesses. Businesses can use AI and machine learning to detect fraudulent financial activity, manage risk, and improve customer service delivery.
- Blockchain and Digital Assets: Blockchain technology and digital assets are expanding beyond cryptocurrencies, so businesses can get the best out of them in terms of identity verification and fund protection.
- Central Bank Digital Currency (CBDC): Several countries around the world, including Nigeria, are already introducing digital currencies as an alternative to their national currencies. Businesses can benefit from embracing and adjusting to anticipated and expected changes in payment methods in this regard.
Conclusively, Financial Technology (FinTech) is a transformative force that is here to stay, and it is expedient for businesses to embrace its innovative solutions which will be helpful in navigating through business financial challenges and help position themselves for growth and longevity.
Abdulsamod Balogun leads Communications and Public Relations at Leonine Investment Services Limited. He's excited about new media, technology and public policy. When he's not working, he's catching up on movies and books.